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Greg Mankiw at it again...

by Cyrille Fri Jun 28th, 2013 at 01:31:10 AM EST

Greg Mankiw came up with a defense of the top 1% (note: I provide the link because that's the done thing. I don't actually recommend that you follow it...). Many people, such as Dean Baker, Harold Pollack, Paul Krugman and even The Economist (and this time I do recommend you follow the links), take this apart.

And yet, they are being much too kind.

Greg Mankiw has written an Economics textbook that is very well regarded, and is still the leader in the undergraduate universities market in the US (although Paul Krugman's seemed to be catching up fast). Because of that, a lot of people will like him or, at any rate, not want to appear to have too bad a word for him. Yet there is a point where this becomes enforced blindness.

front-paged by afew


And with Mankiw we are now long past that point, though people may need a different tipping point to come to realise it. I remember that the first time I posted a critical comment about something he had said, I felt compelled to add that he of course had to be a much better economist than me and that this made it all the more surprising to see him say something so demonstrably false. I got several replies (including by professional economists) saying in essence that I was probably a better economist than him, if only because I retained intellectual integrity.

I had not reached my tipping point then, but I think I had before the event that should have made every observer come to the obvious conclusion: his willingness, in promoting Mitt Romney's campaign, to make countless statements that were in flat contradiction of his main claim to fame, namely his own textbook. I have already written in these pages about my puzzlement at how willingly some academics will sell their intellectual integrity to the highest bidder. This should be the ultimate crime in any intellectual field, yet in economics it seems to be a career booster.

Presumably, the wisest thing would be to ignore him entirely. But he is, regrettably, still trotted out as a credible voice in the media, and indeed by people in positions of power. So, just look at what can pass for wisdom these days:

Using Paul Krugman's summary, "Mankiw argues that the 1 percent make so much because of their high contribution to output -- basically, that they have high marginal productivity. So they earn what they get; and Mankiw further argues that economic opportunity is in fact relatively if not perfectly equal."

Mankiw comes up with Steve Jobs and J.K. Rowling as evidence that it's all about phenomenal marginal productivity. Well, I would dispute that it was true even of those, but that is beyond disingenuous: the top 1% is not near being fairly represented by this sample.

On the other hand, it has been shown that CEO's (and other top management positions) compensations were typically allocated in a "you scratch my back I'll scratch yours" process, by boards made up of other executive directors, and with an almost complete disregard for actual performance -CEOs of companies that had lost money tended to nonetheless get big pay rises. This has produced a situation in which the ratio of top to median salary in big organisations has gone through the roof since the early 80s, despite innovations and growth not improving over the period.

It's also amazing to talk of rising inequality without giving an example in finance (which has captured over 50% of the additional value added in the last decades). It's hard to claim that traders have a stellar contribution to output -indeed, beyond the level where they provide sufficient liquidity -and we are well beyond that- they probably have a negative contribution.

Still, one may retort that what matters for compensation is not contribution to output in general (i.e., contribution to the social good), but rather to the profits of one's employer. This would hardly be a positive feature of the current system (and therefore this would be something that the state would have some grounds to try and redress), but a feature nonetheless.

But, on top of that not explaining the top managers getting pay rises when doing poorly, or golden parachutes, what then would you make of the hedge funds managers raking in over a billion dollars a year (admittedly there are not many of them) despite trailing the leading indexes over a decade? Their productivity was less than that of a few lines of software that would pass random orders. A billion dollars (taxed at 15% only, to boot) for that? Surely a sign that the system is the best there can be.

Mankiw's odd choice of examples (though even they are unconvincing) should not be seen as just an oversight. This looks much more like propaganda.

Of course, even if the incredible compensations were related to high marginal productivity, that would not mean that they should stay that way. No one gets wealthy on a desert island, and the environment that led to high productivity needs to be paid for, presumably to a greater extent by those who benefit from it the most -Dean Baker touches on that subject. But that Mankiw's conclusions would not even follow from his point should not let us concede it when it is blatantly disingenuous.

As for equality of opportunity, it defies belief. Here we have a Harvard professor, allegedly of a scientific field, making his point based, in the great Tom Friedman tradition, on his own (highly implausible) perception of a single anecdote, despite there being tons of easily available data on the subject. Data that, should we be surprised about it, would have flat out contradicted his point.

I don't think I should take too much time to describe how much -especially in a society where who you know is getting increasingly more important than what you know- a child growing in a destitute environment will (and certainly all other things being equal) have inferior opportunities from one growing in a highly privileged one. If you want anecdotal evidence, look at the Bush family, and its incredible succession of great rewards to extremely mediocre individuals, but the usual way to do that is to look at interquintiles mobility:

(actually even that will only be an incomplete picture of the gap: the increase in inequality has mostly been between the top 0.1% and the rest. Even the top quintile only has 0.5% of its members in that particular stratosphere).

That Mankiw should so strongly violate a major principle of academics when, by an oh-so-unexpected coincidence, doing so would so greatly serve his predetermined conclusion should not be viewed, as Krugman and Pollack appear to do, as mere lack of observation and curiosity. It is dishonesty of the highest order. And, as I earlier pointed out, Mankiw had already long, long got past the point where there was any doubt to give him the benefit of.

Of course, I believe that Baker, Krugman and Pollack know that, but that they cannot openly say so in major publications (would that be a case for libel?). This is not -yet, at any rate ;-) - a major publication, so let's state it plainly. Greg Mankiw is dishonest.

(Cross-posted on Anachronicles)

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Mankiw's work can be easily understood, including the internal semi-logic, if the basic understanding is that he writes propaganda.

No?

"Life shrinks or expands in proportion to one's courage." - Ana´s Nin

by Crazy Horse on Thu Jun 27th, 2013 at 01:23:09 PM EST
Well, in short, yes.

But then it should be clearly stated by all concerned that that is what he does. We should see him referred to as "propagandist Greg Mankiw", and not "recipient of the Nobel prize (which isn't a Nobel, I know, but it's usually stated that way) Greg Mankiw".

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

by Cyrille (cyrillev domain yahoo.fr) on Fri Jun 28th, 2013 at 02:23:14 AM EST
[ Parent ]
At one point, you say that the wisest thing may be to ignore him.

I don't think this is true.  Propagandist stooges for the 1% are no better than racists, imperialists, and other unacceptable purveyors of idiocy and hate.  They all should be shouted down from the public square.  They have the right to say what they like, but they are not entitled to a megaphone for their toxic ideas, nor are they entitled to an unopposed audience in the public sphere.

by Zwackus on Fri Jun 28th, 2013 at 07:08:29 AM EST
Well, I agree with you. I meant that he should be ignored by everyone -so that he would not be in the public square. He should not be published by any reasonable medium.

But, since he is, we must keep showing that he is a shameless propagandist.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

by Cyrille (cyrillev domain yahoo.fr) on Fri Jun 28th, 2013 at 07:47:53 AM EST
[ Parent ]
The problem is also that he is privileged, indeed charged, to indoctrinate ALL Harvard undergraduates who take introductory economics with his definitive version of 'mainstream' economic propaganda. And Harvard is hardly unique in this. Nor will the 'mainstream' media even raise the issue.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Jun 28th, 2013 at 10:28:01 AM EST
[ Parent ]
I'll bet a reasonable percentage of Harvard econ undergrads have a fair understanding of the CGHQ intertoobz, and do become aware of alternative interpretations "mainstream" shit.

Here's the txt version of google "Mankiw mainstream"


EconoSpeak: Mankiw's Reply to the Walk-Out
econospeak.blogspot.com/2011/12/mankiws-reply-to-walk-out.html‎
Dec 4, 2011 - That said, I think Mankiw fails to see two ways in which his introductory course, and other mainstream econ courses, impose a worldview that ...
Economist's View: "Mankiw's Reply to the Walk-Out"
economistsview.typepad.com/...12/mankiws-reply-to-the-walk-out.html‎
Dec 4, 2011 - That said, I think Mankiw fails to see two ways in which his introductory course, and other mainstream econ courses, impose a worldview that ...
Greg Mankiw's Blog
gregmankiw.blogspot.com

4 days ago - A sequence of observations on financial- and macro-economics.
Greg Mankiw's Blog: Galbraith on Mainstream Economics
gregmankiw.blogspot.com/...galbriath-on-mainstream-economics.html‎
Nov 3, 2008 - But there are at least 15,000 professional economists in this country, and you're saying only two or three of them foresaw the mortgage crisis?
Marglin and Mankiw | Jacobin
jacobinmag.com/2012/01/marglin-and-mankiw

Jan 20, 2012 - The point here is that this is a mainstream ideology, it's not Mankiw's ideology. Mankiw is perfectly right when he says that his text is a ...
Occupy Economics | Jacobin
jacobinmag.com/2011/12/occupy-econ/‎
On November 2, a group of Harvard students walked out on Greg Mankiw's intro ... he sees himself as following Samuelson's path, representing the mainstream.
anti-mankiw
anti-mankiw.blogspot.com/‎
Dec 22, 2012 - At various points during Anti-Mankiw's history we've devoted ourselves to a topic that is often completely ignored by the mainstream: institutions ...
anti-mankiw: Anti-Mankiw's Favorite Textbooks and Teaching Methods
anti-mankiw.blogspot.com/...anti-mankiws-favorite-textbooks-and.html‎
Nov 15, 2011 - We at Anti-Mankiw strongly disagree with Mankiw's reply. Mankiw's argument rests on the assumption that the building blocks of mainstream ...
Defending the indefensible | Michael Roberts Blog
thenextrecession.wordpress.com/2013/06/19/defending-the-indefensible

Jun 19, 2013 - He is also author of the most widely used textbook on economics by university undergraduates. So he could not be more 'mainstream'. Mankiw ...
Know What You're Protesting - Economic View - NYTimes.com
www.nytimes.com/2011/.../know-what-youre-protesting-economic-view.ht...
Dec 3, 2011 - N. Gregory Mankiw, an economics professor, has a message for students ... The course I teach is a broad survey of mainstream economics.

so the stoonts are likely aware that there is an anti-Mankiw website.

"Life shrinks or expands in proportion to one's courage." - Ana´s Nin

by Crazy Horse on Fri Jun 28th, 2013 at 11:39:20 AM EST
[ Parent ]
True, but they have to drink from the poisoned chalice if only to get a good grade in the course. This prevents many, including those who cannot get such a repugnant set of assumptions up in their minds without severe emotional distress and those who rebel at being forced to make such assumptions, from taking the course. Introductory economics is important, if not required, for many majors other than economics, from political science to engineering. In effect they are being forced to take the equivalent of a religious course in the faith and dogma of the dominant religion. Mankiw should be required to offer his course through the religious studies department.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Jun 28th, 2013 at 02:19:42 PM EST
[ Parent ]
ARGeezer:
In effect they are being forced to take the equivalent of a religious course in the faith and dogma of the dominant religion. Mankiw should be required to offer his course through the religious studies department.

and like many religions what is demanded is the de-souling, the uncoupling of the will from the desire for the greatest good for the greatest number.

it's anti-religion, seen that way. an amputation of natural empathy, subbed with a prosthesis of pure self-interest.

only committed assholes need apply...

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Fri Jun 28th, 2013 at 03:20:22 PM EST
[ Parent ]
People used to be comfortable spouting racist BS in public.  Now, not as much.  If economists were caught and shamed like Paula Deen every time they were intellectually dishonest in public, it would be a huge step forward.
by Zwackus on Fri Jun 28th, 2013 at 08:16:39 PM EST
[ Parent ]
I'm still reeling from a phrase someone used in an email to me in 1999: 'economic discrimination.'

We're at least aware of racism, sexism, and the rest. But the cultural values of the West are currently founded on 'economic discrimination' - just as they used to be founded on slavery, genocide, etc.

And we need to attack it with a stronger and more memorable message than 'It's wrong, and people shouldn't do it.'

But getting from here to a place where discriminating for or against individuals on the basis of their financial assets is seen as equivalent to any other ism is going to be a long, long road.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Sat Jun 29th, 2013 at 06:29:07 AM EST
[ Parent ]
And I don't think it's going to be possible until a real intellectual antidote to the "You get what you deserve" poison that runs through modern Christianity (God's faithful are rich and prosperous!), the self-help movement (Positive thinking can achieve anything, so if you failed, you must not be thinking positively enough!), and modern economics (high salaries are a sign of high marginal productivity!).
by Zwackus on Sat Jun 29th, 2013 at 10:55:35 PM EST
[ Parent ]
"that runs through modern Christianity (God's faithful are rich and prosperous!)"

I think this should rather be considered as running through Protestantism.
The Catholic faith (not that rich Catholics would place too much an emphasis on it) seems to run rather differently.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

by Cyrille (cyrillev domain yahoo.fr) on Sun Jun 30th, 2013 at 03:03:54 AM EST
[ Parent ]
Doctor X, "pure shit" and the Royal Society's motto   Edward Fullbrook   RWER Blog

Recently at a large party I found myself sitting next to a very likable young middle-aged academic tenured at an elite British university, whom henceforth I will refer to as Doctor X and whose field is closely associated with this blog. Doctor X was unfamiliar with both the Real-World Economics Review and the World Economics Association.  But when I described the purposes of the latter, in particular the fostering of a professional ethos that prioritized the advancement of knowledge rather than the preservation of orthodoxies and the promotion of vested interests, there was an instantaneous recognition of a central relevance to his/her intellectual and career situation.

"Every year I publish papers in the top journals and they're pure shit."  Doctor X, who by now had had a glass or two, felt bad about this, not least because "students these days are so idealistic and eager to learn; they're really wonderful."  Furthermore Doctor X could and would like "to write serious papers but what would be the point?"

I then listened to an explanation of Doctor X's predicament that went roughly like this.

One naturally feels loyalty to one's immediate colleagues.  The amount of funding Doctor X's department receives depends not on how many papers or their quality its members publish, but instead on in which journals they are published.   The journals in Doctor X's field in which publication results in substantial funding will not publish "serious papers" but instead only "pure shit" papers, meaning ones that merely elaborate old theories that nearly everyone knows are false.   Moreover, even to publish a "serious paper" in addition to the "pure shit" ones could taint the department's reputation, resulting in a reduction of its funding.   In any case, no one at a top university would read a "serious paper" because they only read "top journals."

Memory of this little encounter came rushing back to me a few minutes ago when reading in today's The Observer an opinion piece by Paul Nurse, the president of the Royal Society.  In a few words he nicely spells out how real science operates and how Doctor X, perhaps no less than me, wishes economics would operate.

   Good science is a reliable way of generating knowledge because of the way it is done.  It is based on reproducible observation and experiment, taking account of all evidence and not cherry-picking data.  Scientific issues are settled by the overall strength of that evidence combined with rational, consistent and objective argument.  Central to science is the ability to prove that something is not true, an attribute which distinguishes science from beliefs based on religions and ideologies, which place more emphasis on faith, tradition and opinion.

    A good scientist is inherently sceptical - the Royal Society's motto, in Latin of course, roughly translates as "take nobody's word for it".


This is how, in a world of financialized politics, the wealthy few control a vital academic discipline to insure their power remains unchallenged by ugly truths. See also the illuminating comment by Paul Davidson.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Jun 30th, 2013 at 05:32:15 PM EST
Am I the only one to be so naive as to think that the above situation illustrates a discipline at the tipping point of dramatic change? Is it conceivable that a significant portion of tenured academics across numerous elite universities might together rebel against this regime, expose its essence and set up an alternative, exercising intellectual freedom and demanding academic freedom, along with the funding to pursue normal research?

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Jun 30th, 2013 at 05:40:28 PM EST
[ Parent ]
The realisation of the amount of crap in economics and its structure does seem to be growing, and hopefully something comes out of it. Though I have a hard time to check for my own growing realisation of just how corrupt it is, and my own hopes for a revolution in economics.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
by A swedish kind of death on Sun Jun 30th, 2013 at 06:02:24 PM EST
[ Parent ]
Theology departments did not disappear from universities nor were they reformed. New academic disciplines were created instead. The same may happen to Economics.

Finance is the brain [tumour] of the economy
by Migeru (migeru at eurotrib dot com) on Mon Jul 1st, 2013 at 05:12:31 AM EST
[ Parent ]
In Sweden, old universities has theology departments. Newer has departments of religious studies with a social science perspective. But the line is far from clear, theology and religious studies departments educate both religion teachers (junior high and high school teachers, where the goal of the subject is to educate about different religions) and priests, though it appears priests must finish their education in Uppsala or Lund, the two really old universities.

So there is probably some kind of scale from orthodox to reformed, with theological parts of theology departments at one end and very social science parts of religious studies departments at the other.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Tue Jul 2nd, 2013 at 01:56:42 PM EST
[ Parent ]
I'm talking about reforming 17th century (not 1970s) Theology to accomodate the scientific revolution. It didn't happen.

Finance is the brain [tumour] of the economy
by Migeru (migeru at eurotrib dot com) on Tue Jul 2nd, 2013 at 02:26:35 PM EST
[ Parent ]
Ah. No, that did not happen.

This ties into something I have been thinking about regarding academic disciplines that are dominant in political elite discourse and thus required reading to get into the political elite. I think they tend to be tailored after the needs of the ruling elite, in terms of collective narrative to motivate teh existence of said elite, common language and tools of power. These do not always match, claiming for example that military victory is granted by God serves the narrative well regarding the victories that brought the eltie into power but serves poorly in understanding military as a tool of power.

So do empires change their dominant academic discipline, and if so how does it happen? Which leads to the question of what was the dominant academic discipline of past empires. Was history mandatory for the Brittish elite, and if so does the fall of the Brittish empire explain why the grand narratives died in history?

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Tue Jul 2nd, 2013 at 02:49:49 PM EST
[ Parent ]
does the fall of the British empire explain why the grand narratives died in history?

I have not kept up on modern historiography - but the tell could be finding ongoing grand narratives, especially triumphal ones, and comparing those to the situation of the culture in which they arose. My problem is my gag reflex tends to prevent me from delving deeply enough into such histories to know.

I suspect, however, that the grand narrative could have been sustained for the USA at least into the 80s. And while the post-modernist critiques have seriously undercut such views, I don't think we can say that the US triumphalists have capitulated. But these are not the sorts of efforts that are widely supported in US Academia. History is still widely presented devoid of any meaningful social theory framework. This was the stronghold of Marxist historians and thus remains suspicious in the USA.  

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Jul 2nd, 2013 at 03:35:12 PM EST
[ Parent ]
This is the real road block to ending the Dark Age.  "Top Journals" in econ usually means the top five.  Schools want professors to publish in them to boost their prestige.  Unfortunately, they're all run either by the same people or by people who agree with those people, so change only really happens from the inside.

That's not so big a problem at (say) U of Missouri-Kansas City, which is a pretty minor school within the state system.  (The flagship school is U of Missouri-Columbia.)  The administration isn't expecting them to be Harvard.

But it's a big problem at schools like Notre Dame (which fancies itself mentioned in the same breath as the Ivies), which basically had its econ department gutted over the lack of Top Fives.

I do think it's going to get better.  Certainly the blogosphere has helped open up the conversation.  And clowns like Reinhart and Rogoff have allowed departments like UMass-Amherst to gain exposure.  Getting a huge name like Jamie Galbraith to back you up helps as well (and certainly nobody can accuse the University of Texas-Austin of being an academic liteweight).

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Mon Jul 1st, 2013 at 08:17:00 AM EST
[ Parent ]
...adding:

I also don't think the gulf between the heterodox Post Keynesians/MMTers and the orthodox New Keynesians is as wide as the spats would lead one to believe based on Krugman and Keen being assholes to each other.

(Confidential to both: No, Paul, DSGE doesn't apply only to NK models -- in fact it didn't even originate with NK.  And no, Steve, you're the one who apparently doesn't understand ISLM, not Krugman.)

It can often appear to be the size of the Grand Canyon when I think it's more like a drainage ditch (okay, maybe a canal).  Oftentimes it seems to just devolve into word games.

Now obviously the gulf between PKs/MMTers and New Classicalists/RBCers is obviously enormous, but it seems to be that even longtime RBCers are throwing in the towel.

They all arrive at pretty much the same conclusions for dealing with our current problems, and there's a reason for that.  The differences are mostly in regard to how best to model -- and it's not that that isn't important, but it doesn't strike me as an insurmountable hurdle.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Thu Jul 4th, 2013 at 09:44:55 AM EST
[ Parent ]
The problem with Krugman and the rest of the Saltwater guys is that they are taking primitive Walrasian garbage into a sound-proofed basement and beating it with a rubber hose until it starts producing reasonable results. Pseudoscience, in other words.

Which leaves them in the fundamentally untenable position of trying to argue that their models are science, but that taking the very same models and not torturing them until they confess is pseudoscience. Or the equally untenable position of acknowledging that the pure-strain Walrasian models are science, but their tortured wrecks are as well.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Jul 4th, 2013 at 03:45:31 PM EST
[ Parent ]
I assume (by Walrasian) you mean general equilibrium with sticky prices/wages bolted on?

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Sat Jul 6th, 2013 at 02:00:38 PM EST
[ Parent ]
I mean utility-optimization loanable-funds models. The Walras/Marshall discussion (general vs. partial equilibrium) is a sideshow in that respect.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Jul 7th, 2013 at 02:37:49 AM EST
[ Parent ]
With you all the way on loanable funds, but why utility-optimization?

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Sun Jul 7th, 2013 at 08:50:54 AM EST
[ Parent ]
Because it's a load of epicycles and Jesuit logic.

Tl;dr version: The human brain is not wired to find first-best solutions. The human brain is wired to find good-enough solutions.

At the risk of dabbling in evolutionary psychology, the selection pressure on human behavior is not "make the smartest decision you can possibly make." It is "make a smarter decision than the other guy, fast enough for it to matter." You do not, after all, need to outrun the tiger. You only need to outrun your friends.

Long version:
What you actually observe is behavior, not utility. Given a big enough set of observed behavior, you can assemble some behavioral heuristics that will predict agent behavior, at least in terms of some statistical aggregate.

You can, of course, always construct some sort of utility function that generates those observed behavioral heuristics when you optimize against it. But such a utility function has no predictive power over and above the set of heuristics you feed into it. This is because

(a) Humans are not consistent in their decisionmaking, so the inferred utility function will either fail to even describe (nevermind predict) observed behavior, or it will contain all sorts of ad hoc modifications reducing both parsimony and predictive power.
(b) Even if humans were consistent in their decisionmaking, no practical amount of data will allow you to specify it with sufficient accuracy and precision (you need both) to yield experimentally useful predictions.

Furthermore, we know that the inconsistency in human decisionmaking is not due to random noise, computational errors or bad input. The inconsistency is fundamental, not an error term you can graft onto your model at the end.

Human decisionmaking is inconsistent as a result of fundamental uncertainty, constraints on computational tractability and the fact that predictive output improves much slower than linearly in input accuracy, and the cost of input accuracy usually scales much faster than linearly.

Model-consistent behavior is not rational, because obtaining the input required to compute the model-consistent strategy is more expensive than just winging it based on learned and instinctive heuristics. And even with perfect and complete input information, computing the first-best solution would still be waste of wetware cycles compared to winging it based on experience and instinct.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Jul 7th, 2013 at 04:11:49 PM EST
[ Parent ]
I once read a paper on Sherlock Holmes that noted that Holmes's times was the last in which a man could know effectively everything.  We are now over a century from Edwardian England, yet we continue to pretend in both economics and politics that every actor is Holmes.
by rifek on Mon Jul 8th, 2013 at 12:14:37 AM EST
[ Parent ]
Knowing "everything" would have been a tall order even by the middle 19th C - even Holmes was careful not to attempt that, see the discussion of his knowledge of fields that he considered irrelevant to his interests in A Study in Scarlet.
by Colman (colman at eurotrib.com) on Mon Jul 8th, 2013 at 05:38:39 AM EST
[ Parent ]
At the risk of dabbling in evolutionary psychology, the selection pressure on human behavior is not "make the smartest decision you can possibly make." It is "make a smarter decision than the other guy, fast enough for it to matter." You do not, after all, need to outrun the tiger. You only need to outrun your friends.

That's precisely what I tell climatology deniers that tell me climate models are 'wrong': they don't have to be 'right' as long as they perform better than the competition. And that's a really low bar against the competing 'models' these deniers proffer.

by mustakissa on Tue Jul 9th, 2013 at 10:43:55 AM EST
[ Parent ]
Keynote Speech to the Aus­tralian Teach­ing Eco­nom­ics Con­fer­ence  -  Steve Keen

This is the keynote speech that I gave to the Aus­tralian Teach­ing Eco­nom­ics Con­fer­ence, the paper for which will be the sub­ject of my next two posts: the decline of Eco­nom­ics from up to 40% of any busi­ness degree to about 4% today. In it I sug­gest that het­ero­dox econ­o­mists should com­plete the march to zero by jump­ing ship and join­ing Account­ing depart­ments. There they could develop a "Mon­e­tary Eco­nom­ics for Accoun­tants" unit that would replace the stan­dard Intro­duc­tory Eco­nom­ics sub­ject required for accred­i­ta­tion as an accountant.

Most academic disciplines need undergraduate students from other departments to be taking their courses in order for the discipline to remain viable and vital. Steve reports that, at universities around the world, the requirements for economics is being dropped from degrees other than economics. Now if we could just get the Sveriges Riksbank to stop awarding their Nobel Memorial Prize we could get on with developing a genuine social science in place of the pseudoscience that currently acts as a very large dog in an increasingly barren manger.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Jul 3rd, 2013 at 12:47:10 AM EST
Steve Keen's youtube is positively spellbinding. Recommended!
by mustakissa on Wed Jul 3rd, 2013 at 05:25:36 AM EST
[ Parent ]


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